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SB 200 Establishes the Safe and Affordable Drinking Water Fund

August 5, 2019 -- Client Alert

On July 24, 2019, the Governor signed Senate Bill 200, which establishes the Safe and Affordable Drinking Water Fund in the California State Treasury to help water systems provide an adequate, affordable supply of safe drinking water in the near and long terms.

I. Summary

SB 200 will provide funding until 2030 to improve the water quality of disadvantaged communities that lack clean water.

In the first year, $100 million of the funding will come from the Greenhouse Gas Reduction Fund (GGRF) and $30 million from the General Fund under the Budget Act. After the first year, SB 200 provides the funding will be 5% of the GGRF, continuously appropriated but capped at $130 million per year.

SB 200 requires the State to develop a plan for expenditure of funds by July 1, 2020. SB 200 requires the State to issue a map of aquifers eligible for funding by January 1, 2021.

II. Background

Water Code Section 106.3 provides it is a human right to have safe, clean, affordable, accessible water for consumption, cooking and sanitation. However, many disadvantaged communities still lack clean water.

Since taking office, Governor Newsom has attempted to garner support for a water tax to appropriate funding for clean water programs in disadvantaged communities. However, the Association of California Water Agencies (ACWA) and many public agencies opposed the proposed water tax (AB 217), which was introduced as a budget trailer bill in January 2019.

On May 15, 2019, a Senate Budget and Fiscal Review Subcommittee rejected the water tax. Instead the Subcommittee adopted a continuous annual appropriation from the general fund to the Safe Affordable Drinking Water Fund. On May 22, 2019, an Assembly Budget Subcommittee also did not approve the water tax. Instead, the Subcommittee approved funding for safe drinking water emergencies and contracts to provide administrative, technical, operational, or managerial services to designated water systems.

Opponents of the water tax agreed that the lack of access to drinking water is a public health and safety issue that needs to be addressed, but preferred the State look elsewhere for resources, such as the State’s general fund.

Therefore, many public agencies supported SB 200 as an alternative to the water tax. Senator Monning, author of SB 200, explained his support for the bill as follows: “[E]xperts estimate that more than 1 million Californians are exposed to unsafe drinking water each year.” SB 200 “creates a framework for the State Water Resources Control Board to receive, administer, and distribute revenue in a responsible, cost-effective manner that prioritizes solutions for those most impacted by unsafe and unaffordable drinking water.”

Thus, SB 200 was introduced on January 31, 2019, passed both chambers by July 15, 2019, and was signed by the Governor on July 24, 2019.

III. Senate Bill 200

A. Funding Under SB 200

The Budget Act of 2019 appropriates $100,000,000 from the Greenhouse Gas Reduction Fund and $30,000,000 from the General Fund to the State Water Resources Control Board (SWRCB) for support or local assistance to fund grants, loans, contracts, or services to help water systems provide safe and affordable drinking water.

Beginning in the 2020–21 fiscal year, SB 200 requires 5% of the annual proceeds of the GGRF, up to the sum of $130,000,000, to be deposited into the Safe and Affordable Drinking Water Fund. The law requires the Director of Finance, beginning in Fiscal Year 2023–24 and until June 30, 2030, to calculate the sum to be transferred by the Controller from the General Fund to the Safe and Affordable Drinking Water Fund if the annual transfer from the annual proceeds of the GGRF is less than $130,000,000, to equal a total transfer into the Safe and Affordable Drinking Water Fund of $130,000,000.

SB 200 defines a disadvantaged community eligible for funding as a specified area with a median household income of less than 80% of the statewide annual median household income level.

Under SB 200, by July 1, 2020, the SWRCB must prepare a policy for the development of a fund expenditure plan.

The fund expenditure plan must include:

1. A list of systems that consistently fail to provide safe drinking water. The list must include: (1) any community water system that serves a disadvantaged community that must charge fees that exceed the affordability threshold established by the SWRCB; (2) any state small water system that consistently fails to provide safe drinking water; (3) public water systems, community water systems, and state small water systems that may be at risk of failing to provide an adequate supply of safe drinking water.

2. An estimate of the number of households that are served by domestic wells or state small water systems in high-risk areas, and an estimate of the funding needed for the next fiscal year.

3. A list of programs to be funded that will assist households supplied by a domestic well that consistently fails to provide an adequate supply of safe drinking water. This list will include the number and approximate location of households served.

4. A list of programs to be funded that will assist households and schools whose tap water contains contaminants at levels that exceed recommended standards.

The fund expenditure plan must prioritize funding for all of the following:

1. Assisting disadvantaged communities served by a public water system, and low-income households served by a state small water system or a domestic well.

2. The consolidation or extension of service; administrative and managerial contracts or grants.

3. Funding costs other than those related to capital construction costs, except for capital construction costs associated with consolidation and service extension to reduce the ongoing unit cost of service and to increase sustainability of infrastructure and service.

The fund expenditure plan may include expenditures for the following:

1. The provision of replacement water as a short-term solution if necessary.

2. The development, implementation, and sustainability of long-term drinking water solutions, including testing of water quality, technical assistance, planning, construction, repair, and operation and maintenance costs associated with (i) replacing, blending, or treating contaminated drinking water, (ii) repairing or replacing failing water system equipment, pipes, or fixtures, and (iii) operation and maintenance costs associated with consolidated water systems, extended drinking water services, or reliance on a substituted drinking water source, and analyses to reduce the unit cost of providing drinking water.

4. Consolidating water systems; extending drinking water services to other public water systems, community water systems, and state small water systems, or domestic wells; satisfying outstanding long-term debt obligations of public water systems, community water systems, and state small water systems; and outreach.

B. State Water Resources Control Board to Develop Aquifer Maps

SB 200 requires, by January 1, 2021, the SWRCB, in consult with local health officers and stakeholders, to make publicly available a map of aquifers that are used, or likely to be used, as a drinking water source at high risk of not meeting drinking water standards.

By January 1, 2021, the new law requires local health officers and other local agencies to provide all data associated with water quality testing of state small water systems and domestic wells by certified laboratories, collected after January 1, 2014, to the SWRCB.

By January 1, 2022 and annually thereafter, SB 200 requires laboratories accredited by the SWRCB to report the results of each drinking water analysis of state small water systems and domestic wells to the SWRCB electronically.

C. Administrative Assistance Available Under SB 200

SB 200 allows the SWRCB to contract with, or provide a grant to, an administrator to provide administrative, technical, operational, or managerial services, or any combination of those services, to a water system to assist with providing an adequate supply of affordable, safe drinking water. Such an administrator must be determined by the SWRCB to be competent to perform the administrative, technical, operational, or managerial services. The law allows a privately owned public utility to serve as administrator. If qualified, an administrator could also provide legal services under SB 200.

D. SB 200 Requires a Permit Before Commencing Operation of a Public Water System

SB 200 prohibits an entity from operating a public water system unless it first submits an application to the SWRCB and receives a permit to operate the system. The SWRCB can deny the permit if it is feasible for the service area to be served by one or more currently permitted public water systems or if it is reasonably foreseeable that the proposed new public water system will be unable to provide affordable, safe drinking water.

SB 200 requires a public water system to submit a technical report to the SWRCB as a part of the permit application or when required in a form the SWRCB specifies.

IV. Practical Implications

The passage of SB 200 appears to have killed the momentum for a water tax.

SB 200 takes effect immediately, but prior to funding any programs, the SWRCB, in consultation with the Department of Finance, must adopt a fund expenditure plan by July 1, 2020. In addition, the SWRCB must develop its aquifer maps of at-risk water supplies by January 1, 2021. It is expected these maps will largely help rural areas, the Central Valley and the Central Coast.

By imposing additional duties on local health officers and local agencies, SB 200 imposes a state mandate. If the Commission on State Mandates authorizes reimbursement, local health officers and agencies providing data to the SWRCB could be reimbursed their costs. Therefore, agencies should retain evidence of their costs in providing the SWRCB data pursuant to SB 200.

For further information, please contact Christine Carson from Aleshire & Wynder, LLP’s Water Practice Group at (310) 527-6660.